Iran tensions add to gas price woes

Politicians normally don't have to worry about oil and gasoline prices until summer, but five days into January, the experts are already bracing for pain at the pump.

Tensions with oil-rich Iran have made U.S. crude oil and gasoline prices as unpredictable as ever, with growing signs that they will remain high enough to be a factor in the presidential race.

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“Iran is going to be a wildcard for the 2012 presidential election in ways that may not be so evident now,” said Pulitzer Prize-winning oil historian and IHS Cambridge Energy Research Associates Chairman Daniel Yergin.

"The combination of economic recovery, sanctions and growing tensions with Iran would all point upwards for oil prices," Yergin added. "If that happens, that will reverberate in U.S. presidential politics.”

U.S. and European Union sanctions against Iran and the threat of a disruption in crude oil supply in the Strait of Hormuz — a narrow channel of waters between Iran and Oman where about one-third of all global seaborne oil passes through — helped U.S. crude oil ring in the new year this week by spiking to an eight-month high.

Gas prices at the pump are at unprecedented highs for January — at just under $3.32 a gallon nationwide for regular gas Thursday, according to AAA.

Regular gasoline averaged $3.51 a gallon nationwide in 2011, the highest annual number ever. U.S. motorists spent about $481.3 billion on gas in 2011, breaking the record of $448 billion in 2008.

And that is politically challenging ground for President Barack Obama to navigate.

“High gasoline prices are the bane of incumbent politicians,” said Daniel J. Weiss, a senior fellow at the Center for American Politics Action Fund. "The question about oil prices is also not only whether they go up a significant amount but when."

Gasoline prices became a major issue in the 2008 presidential race, with chants of “drill, baby, drill” becoming a mantra at the GOP convention as regular gas prices nationwide reached a record high of $4.11 a gallon.

Presidential candidates in both parties that year — notably John McCain and Hillary Clinton — went so far as to call for a gas tax holiday, an idea that candidate Obama at the time dismissed as a gimmick.

But the prices at the pump became a nonissue when they plummeted by Election Day due to the financial market crash. That scenario likely won't repeat itself in 2012, especially since prices are starting the year at a higher point.

“It’s hard to imagine prices going down enough to take price off the political agenda,” said Guy Caruso, head of the Energy Information Administration under President George W. Bush and now a senior adviser at the Center for Strategic and International Studies.

Obama — unlike in 2008 — now, as president, has the exclusive power to make a couple of key decisions this year.

He will have to make a decision by mid-February to grant or deny a presidential permit for TransCanada’s Keystone XL pipeline because of a 60-day deadline included in legislation he signed Dec. 23 extending the payroll tax cut holiday. The conventional wisdom has been that Obama will deny the project — which pits some major labor unions against environmental groups — while reserving the right to approve it in 2013 once an alternative route in Nebraska is agreed upon and analyzed.

Republicans and oil industry officials already have guns blazing in criticizing Obama for taking this long to approve the project — including a new campaign Wednesday by the American Petroleum Institute to make it and other energy issues prominent with voters in November.